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Food Industry Likely To Maintain Palm Oil Imports In Turkey

The Republic of Turkey has been tested with geopolitical issues since 2018 that has seen a severe drop in its economy, mainly reflected in depreciation the Lira. However, by Q4 2019, things are looking to be positive for Turkey, heading into the new year with analysts anticipating a recovery in 2020. Turkey started the year where it left off in 2019, on positive economic indicators with the positive financial market growth and manufacturing sector picked up to a new 2-year high of 52.4 points in February 2020 according to the Istanbul Chamber of Industry PMI.

However, it is unsure if the forecasted 3.1 percent growth for 2020 by OECD will materialise as tourism sector will be heavily affected in the government’s effort to curb the Covid-19 pandemic by imposing travel bans and lockdown that will affect local businesses. Tourism sector contributed around US$35 billion in 2019 of which 88 percent came from foreigners’ spending in Turkey.

Turkey is one of the last countries to record positive coronavirus case in the world. It was not until the 11 March, 2020, when Turkey reported its first case of coronavirus. However, within two weeks, the number of positive cases reached 2,433 cases with 59 reported deaths. The country has stepped up its restrictive movement orders by advising home quarantine, closure of non-essential businesses and finally, forcing all 65-year old and above citizens to stay at home. This affects businesses and consumers’ spending.

Oils & Fats Market Outlook

Despite the challenges, the demand for food will continue to increase in Turkey. The situation in the eastern borders has brought in an influx of refugees into the country. Big corporations that initiated expansion plans through physical investments and acquisition have commitments to make and will continue to produce food to cater the needs of local demand, plus new emerging market in Africa and Middle East countries. Interviews with local food manufacturing companies indicated that most of their operations are running at full capacity despite the Covid-19 situation as demand for food didn’t drop. This is supported by the PMI data as new orders improved due to the recovery in demand and new export orders also improves. This is a positive indication for an increase in palm oil imports which is normally used in this sector.

The HORECA sector might be affected during the pandemic period as tourism activities have dropped significantly. However, it will only last until the end of April (depending on the latest development of Covid-19 in Turkey) as the authorities have indicated that peak tourism would start later than usual.

In terms of local supply, production of oilseeds especially sunflower seed is expected to drop around 4 percent, followed by a 7 percent drop of cottonseeds and around 2 percent drop of soybeans. This is due to the lower rainfall, especially in the Thrace region by 40 percent as compared to last year during the October 2019 – January 2020 period.

Turkey is the leading importer of Malaysian palm oil in this region, and it is essential to understand its market development to gauge the region’s performance. All factors taken into consideration, it is expected that Turkey’s import for 2020 will drop slightly to around 690,000 MT or 10 percent due to the weaker demand from the HORECA sector. As of February 2020, total exports of palm oil to Turkey recorded 12,720 MT increase as compared to last year.

Prepared by Mohammed Hafezh

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